We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

Patent litigation at the USPTO under the America Invents Act of 2011

Congress is currently on the verge of passing patent reform legislation. Such legislation, if enacted, is expected to track the substance of the America Invents Act, H.R. 1249 (“the Act”). A major aim of the reform legislation is to establish the United States Patent and Trademark Office (USPTO) as an alternative forum to U.S. district courts for vetting the validity of issued U.S. patents. Multiple sections of the legislation are directed toward this end. These sections modify existing practice and provide entirely new structures and legal bases for deciding patentability questions at the USPTO.

Given the scope of these changes, rather than provide a section-by-section review of the legislation, this summary analyzes how the Act as a whole opens the door wider for patent litigation at the USPTO1. First, this summary looks at the new agency-level decisionmaking body created by the Act, called the Patent Trial and Appeal Board (PTAB), and its composition, role and procedures. Second, this summary looks at the four new (or recast) grounds for vetting patentability at the USPTO on behalf of patent owners or third-party challengers. These grounds include post-grant review, inter partes review, supplemental examination, and the original ex parte reexamination. We also describe various strategic issues raised by H.R. 1249 as it aims to move more patentability decisions to the USPTO and at the same time make them more timely and efficient.

What is the Patent Trial and Appeal Board (PTAB)?

The America Invents Act creates a new administrative body at the USPTO, the Patent Trial and Appeal Board, for deciding questions on issued U.S. patents. See, H.R. 1249, Sec. 7. The PTAB replaces the current Board of Patent Appeals and Interferences and is to be made up of the Undersecretary for Commerce for IP and USPTO Director, Deputy Director, Commissioner for Patents, Commissioner for Trademarks, and administrative patent judges (APJs). Sec. 7(a).

The PTAB will be the chief forum for the two new USPTO patentability litigations: post-grant review (PGR) and inter partes review (IPR). Under the Act, three-member panels of APJs will conduct all IPR and PGR proceedings. The duties of the PTAB will also cover all appeals of adverse decisions by Examiners on applications in regular prosecution and on proceedings in ex parte reexamination (and existing inter partes reexamination until phased out by IPR). See, Sec. 7(a). The PTAB thus provides the highest level of decision-making authority at the UPSTO, and appeals from the PTAB in applications and reexamination proceedings may be made directly to the Federal Circuit. There are no provisions for district court review of PGR or IPR final decisions, such as those previously provided to interference proceedings. Sec. 7(b).

Most of these changes with respect to the PTAB have an effective date of 1 year from enactment. But there are some important exceptions with respect to certain ongoing reexaminations proceedings which take effect immediately upon enactment. For example, the threshold for initiating an inter partes reexamination will immediately change from whether the request sets forth a “substantial new question of patentability” to whether “the information presented in the request shows that there is a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request.” In theory, this should raise the threshold for initiating an inter partes reexamination.

What rules of practice apply to practice before the Patent Trial and Appeal Board (PTAB)?

The rules of practice will likely vary depending upon the particular proceeding pending before the PTAB. While the America Invents Act establishes proceedings before the PTAB as an alternative to district court litigation on validity, Congress charges the Director of the USPTO with developing the specific rules of conduct and evidence. It clear from the legislation, though, that the new PGR and IPR proceedings are likely to have strict time deadlines and many characteristics of a litigation directed to fact-finding and case presentation.

For example, section 6 of the Act sets out the conduct of post-grant review. For PGR and IPR before the PTAB, the USPTO Director is instructed to prescribe regulations governing, inter alia, treatment of sealed motions, standards for showing sufficient grounds to institute a review, procedures for submission of supplemental information, standards and procedures for discovery of evidence relevant to factual assertions of the parties, sanctions for abuse of discovery or process, protective orders, use of affidavits or declarations, and parties’ rights to an oral hearing. Discovery in IPR may be even more robust than PGR in that it may include deposition of witnesses submitting affidavits or declarations and “what is otherwise necessary in the interest of justice.” Sec. 6(a). With respect to timing, both the PGR and IPR processes must yield a final determination within one year, absent good cause. Sec. 6. And, where good cause is shown, the proceeding may only be extended an additional 6 months. Given this framework, IPR and PGR will likely be very different proceedings from current inter partes reexamination.

One possibility we foresee based on our interference practice is that the PTO may set up PGR and IPR proceedings to be conducted more like current interference proceedings than district court litigation. This fits well with the Act and, if the PTO were to go this route, it may mean the new IPR and PGR would have clear end points for the last deadlines in a case, which cannot be extended, virtually no discovery beyond deposing affiants, and fairly short (i.e., 1 hr) oral hearings. On the other hand, since a party will not be able to go to district court to supplement the evidentiary record (like one can in seeking review of an interference), a policy argument can be made that the PTO should be more permissive in granting additional discovery in IPR/PGR than they are in interferences.

We recommend monitoring the development of these details on the conduct of review proceedings and operation of the PTAB closely. This role for the PTAB forges new ground for the USPTO and extends beyond much of the current appellate work and interference work handled now by the BPAI. The four ways to vet the patentability of issued patents set forth in the America Invents Act are described further below.

How can patentability be litigated post-grant at the USPTO?

There are four ways following enactment of the America Invents Act to challenge the patentability of an issued patent. They are (1) post-grant review (PGR), (2) inter partes review (IPR), (3) supplemental examination (SE), and finally, (4) the familiar ex parte reexamination (XPR). The primary vehicles for litigating patentability at the USPTO are the new PGR and IPR proceedings. The new SE proceeding provides an exclusive vehicle by which patent owners may request that the PTO consider, reconsider or correct “information believed to be relevant to the patent.” If such information raises a “substantial new question of patentability,” the PTO will order reexamination of the patent. The SE proceeding will then proceed like XPR. The previous proceedings for XPR remain essentially unchanged.

The easiest way to understand the differences between the PGR and IPR proceedings is to compare them side-by-side. The chart on the next page facilitates that review:

As illustrated, the PGR and IPR proceedings share many important similarities. But the key differences highlight the different roles they were envisioned to fill. For instance, PGR may be requested only in the first nine months after a patent issues. It has a wider scope than IPR and appears to fulfill the role of immediate and proactive review of newly-issued patents that are of potential concern to competitors. Effective use of PGR will likely require close monitoring of pending applications and issued patents.

IPR, on the other hand, is narrower in scope and may not be initiated until nine months after a patent issues. It appears to fulfill the role of the current inter partes reexamination as a vehicle for accused infringers or corporate competitors to challenge patentability before the USPTO. While potentially narrower in scope, IPR arguably provides for more thorough review in that it allows for depositions of witnesses submitting affidavits or declarations—a first in USPTO reexamination proceedings.

Both PGR and IPR contain provisions designed to mitigate problems associated with parallel validity/patentability challenges. For instance, the statute prohibits the initiation of PGR or IPR if the petition is filed after the petitioner (or the real party in interest) has challenged validity in a declaratory judgment action. If the declaratory judgment action is filed after filing a petition for PGR or IPR, the declaratory judgment action will be stayed, unless, for example, a counterclaim for patent infringement is initiated. Further, forcing accused infringers to file petitions for IPR within one year of the civil action will ameliorate the issues that arise where parallel challenges have significantly different timelines for resolution.

The threshold for initiating review of issued patents via PGR and IPR is significantly different than the threshold for initiating prior reexamination proceedings. Specifically, there will not be any requirement in PGR or IPR to prove up a “substantial new question of patentability” or an “SNQ.” The SNQ was previously required to initiate any reexamination of an issued patent. The SNQ was perceived as a very low threshold, and the vast majority of well-constructed requests resulted in an ordered reexamination. Now the threshold standards are different for inter partes challenges—a “reasonable likelihood of success” for IPR and a “more likely than not” standard for PGR. Whether these prove to be more significant gatekeepers than the prior SNQ standard will be largely determined by the Office’s interpretation of these two new standards.

Turning to supplemental examination, SE may serve as a vehicle for patent owners to clear up or correct any inadvertent or even negligent errors in prior prosecution that could have previously led to allegations of inequitable conduct. For instance, a patent owner who comes across art or other information that was inadvertently — or even negligently — not cited to the Office during original prosecution, or incorrectly presented to the Office, now has a means to petition for SE as a way to proactively avoid any potential allegations of inequitable conduct. SE cannot, however, be used to correct fraud on the Office. Additionally, SE cannot be used as a shield against a finding of unenforceability if the culpable conduct was previously alleged with particularity in a civil action or in a “notice letter” from a potential generic drug manufacturer. Notably, the threshold determination for initiation of an SE is whether the omitted or incorrect art or information raises a “substantial new question of patentability”—the same threshold for the current ex parte and inter partes reexamination. Upon finding that such an SNQ is raised, the Office will order reexamination of the patent, even if the SNQ arises due to the provision of information that would not be eligible for consideration under the reexamination statute.

Finally, the proceedings for ex parte reexamination, which have been around since the early 1980s remain largely unchanged. Any party, at any time, may still request traditional ex parte reexamination. Notably, the American Invents Act now explicitly forecloses any appeal to the district court in ex parte reexamination. Specifically, the act amends 35 U.S.C. § 306 by striking the reference to § 145 actions. This is believed to correct a prior oversight that appeared to leave open the possibility of § 145 appeals in ex parte reexamination.

Potential Strategies and Practical Realities

As illustrated above, a number of new strategies for patent challengers and patent owners are offered by the America Invents Act, H.R. 1249. Some of these are quite fundamental. Potential patent challengers will have to weigh the potential benefits of the new PGR and IPR options before the PTAB against the costs of district court litigation and the potential estoppels. For example, the strict timeframes for resolving PGR and IPR may be especially attractive for parties accused of infringement or a party under a license request, but estoppel will have to be looked at even more closely than today’s estoppels in inter partes reexamination. The statutory timelines and the new role of the PTAB, which combines BPAI and Central Reexamination Unit functions, are expected to dramatically shorten the length of proceedings compared to current reexamination proceedings. This may lead to more final decisions issuing with estoppel effects.

As another example, the higher threshold for initiation of PGR and IPR, if given real teeth by the PTAB, may play a significant role in determining the degree to which requesters make use of these new proceedings. Finally, the practical considerations and complexities raised by any final regulations governing the conduct of PGR and IPR proceedings will undoubtedly impact the efficacy and desirability of these new post-issuance patentability challenges.

Defendants in concurrent litigation will need to watch closely the enactment date and its impact on any ongoing reexaminations filed or under consideration and its impact on litigation stay strategy. Defendants in concurrent litigation will also want to develop and vet patent litigation strategies based on challenging patentability at the USPTO as soon as they have notice of the suit to keep their options open and avoid being precluded from filing a PGR or IPR depending on the review timelines ultimately passed by Congress. The wider scope of PGR to allow review of patentability on section 112 grounds, e.g., for lack of enablement, may be especially attractive to defendants facing patents asserted in technologies such as biotechnology or the chemical arts, where section 112 has created greater patentability and validity hurdles for patentees. On the other side of the “v,” patent owners may wish to take advantage of the new supplemental examination as part of its strategy prior to bringing a patent infringement suit. Patent owners also may adjust their own licensing or enforcement strategies to account for when the window for PGR closes.

Ultimately, many practical realities may come into play. Significant resources and work will be required to implement the patent litigation options at the USPTO. The ability to staff and fund the PTAB to carry out its new mission will be critical to the actual options made available to both patent owners and patent challengers to test patents in a lower cost forum under the America Invents Act.

To view all formatting for this article (eg, tables, footnotes), please access the original here.

Related topic hubs

Compare jurisdictions: Arbitration

“Lexology/Newsstand articles are very good quality. I like the short summary style and how it is broken down by practice area. Lexology/Newsstand is a good indicator of whether a law firm has an attorney who is knowledgeable about a subject area.”